Solveig Singleton and Ryan Chan-Wei
Merchants pay swipe fees to credit card networks (also called “interchange fees”) each time a consumer uses a card. The Credit Card Competition Act (CCCA), which would impose price controls on interchange fees, is circulating on Capitol Hill after the abandonment of an attempt to add the text to draft legislation on digital asset market structure.
Congress should not cap interchange fees. History shows that fee caps harm consumers and serve no valid purpose. The CCCA caps would be a gift to large retail merchants at the expense of everyone else.
Fee caps hurt consumers
Caps on credit card interchange fees would be counterproductive: Cuts in interchange fees are rarely passed on to consumers and trigger increases in other fees.
Most of the cost savings from interchange fee caps—though potentially limited by other merchant fee increases—would be enjoyed by large retail merchants. After the Durbin Amendment capped debit card interchange fees in the United States in 2010, 77 percent of merchants made no change to their prices, 22 percent actually raised prices, and only about 1 percent lowered them.
Furthermore, debit card issuers adapted to the Durbin Amendment caps by increasing minimum balances and maintenance fees on checking accounts and reducing offerings of free checking accounts. One study estimates that caps on debit card interchange fees cost consumers between $22 billion and $25 billion. Low-income consumers were disproportionately affected by higher minimum balance requirements. This experience alone is enough for Congress to think twice before imposing caps on interchange fees for credit cards.
Lessons from overseas
Other jurisdictions have had similar experiences with interchange fee caps. Australia capped credit card interchange fees in 2003 and allowed merchants to pass the fees on to consumers through surcharges. Consequently, annual card fees increased and rewards were reduced, with the average amount a cardholder must spend to earn a voucher worth AUD $100 rising nearly 50 percent by 2011. Australian consumers pay about AUD $1.2 billion annually in surcharges that did not exist before regulation.
Europe’s experience bears this out as well: The European Union capped interchange fees in 2015, but other merchant service charges then increased and now exceed pre-regulation levels. When Spain reduced credit card interchange fees between 2006 and 2010, average credit card annual fees spiked and interest rates rose, but merchants did not pass savings on to consumers.
More regulation is not the answer
Even if credit card networks were afflicted with market failure (which is doubtful), intervention would replace this with government failure, as politicians and influential firms can manipulate the regulatory process for their own gain. Furthermore, market conditions change faster than regulators can adapt, and it is unlikely that regulators would adjust interchange fees with the requisite precision.
Markets offer a far more powerful solution than regulation does, and the payments landscape is undergoing rapid transformation, placing meaningful competitive pressure on incumbent card networks. Among the compelling challengers are stablecoins, which support fast, low-cost transactions domestically and across borders. Stablecoin use is growing rapidly: Stablecoin transaction volume reached $33 trillion worldwide in 2025, up 72 percent from 2024. The recently enacted GENIUS Act will catalyze institutional adoption in the United States.
Other contenders include fast-payment systems, open interoperable platforms that enable instant account-to-account transfers at low cost. Brazil’s Pix and India’s Unified Payments Interface (UPI), for instance, have significantly encroached on credit cards’ market share in their respective jurisdictions. Although central banks played an important role in establishing the Pix and UPI infrastructure, the dynamism that makes these systems transformative came overwhelmingly from the private sector.
The Indian government’s app accounts for only a small fraction of UPI transactions, while private entities such as PhonePe and Google Pay together command over 80 percent of the market, winning users over with innovative features and comprehensive app ecosystems. In Brazil, digital-first players such as Nubank and Mercado Pago built their businesses around Pix’s open infrastructure, reaching millions of consumers and merchants that the country’s traditional banking sector had not served effectively. The decision to open these systems to nonbanks and fintechs “broke historical patterns where only banks could shape the digital payments landscape.”
Where the market is free to build competing payment rails, consumers and merchants will benefit from lower costs, faster settlement, and greater choice. Price controls such as fee caps, on the other hand, stifle the competitive and innovative forces that allow markets to provide these benefits. Congress should direct its efforts toward enabling competition and innovation for the payments system, not toward crude constraints on the internal pricing of incumbent card networks.
